<PAGE>   1
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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-K
       [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED JANUARY 31, 1999

                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                         COMMISSION FILE NUMBER 0-028176

                            WHITEHALL JEWELLERS, INC.
             (Exact Name of Registrant as Specified in Its Charter)

            DELAWARE                                          36-1433610
(State or Other Jurisdiction of                            (I.R.S. Employer
  Incorporation or Organization)                         Identification Number)

                 155 N. WACKER DR., STE. 500, CHICAGO, IL 60606
          (Address of principal executive offices, including zip code)

                                 (312) 782-6800
              (Registrant's telephone number, including area code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

               COMMON STOCK, PAR VALUE $.001 PER SHARE, INCLUDING
                   ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES  X   NO
                                       ---     ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of April 16, 1999 was $131,240,847.50, based on the closing price
of $15.875 of the registrant's common stock on the NASDAQ Stock Market. This
calculation does not reflect a determination that persons are affiliates for any
other purposes.

Number of shares of Common Stock outstanding as of April 16, 1999:  9,622,143
Number of shares of Class B Common Stock outstanding as of 
April 16, 1999: 101.298

                      Documents Incorporated by Reference:
Part II - Portions of the registrant's annual report to stockholders for the
registrant's fiscal year ended January 31, 1999 (the "1998 Annual Report"), as
indicated herein. 
Part III - Portions of the registrant's definitive proxy statement to be 
distributed in conjunction with registrant's annual stockholders' meeting to be 
held in 1999 (the "Proxy Statement"), as indicated herein.

================================================================================


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                                     PART I

         All statements, trend analysis and other information contained in this
report relative to markets for the Company's products and trends in the
Company's operations or financial results, as well as other statements including
words such as "anticipate," "believe," "plan," "estimate," "expect," "intend"
and other similar expressions, constitute forward-looking statements under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements are subject to known and unknown risks, uncertainties and other
factors which may cause actual results to be materially different from those
contemplated by the forward-looking statements. Such factors include, among
other things: (1) the extent and results of the Company's store expansion
strategy; (2) the seasonality of the Company's business; (3) economic
conditions, the retail sales environment and the Company's ability to execute
its business strategy and the related effects on comparable store sales and
other results; (4) the success of the Company's marketing and promotional
programs; (5) the extent to which the Company is able to retain and attract key
personnel; (6) competition; (7) the availability and cost of consumer credit;
(8) relationships with suppliers; (9) timely "Year 2000" compliance by the
Company and third party suppliers and service providers; (10) the Company's
ability to maintain adequate information systems capacity and
infrastructure;(11) the efficient and successful integration of the Jewel Box
locations and assets into the Company's existing operation;(12) the Company's
leverage; (13) fluctuations in gem and gold prices; (14) regulation; and (15)
the risk factors listed from time to time in the Company's filings with the
Securities and Exchange Commission.

ITEM 1.  BUSINESS

THE COMPANY

         General. Whitehall Jewellers, Inc. (formerly known as Marks Bros.
Jewelers, Inc.) (the "Company") is a leading, national specialty retailer of
fine jewelry (based on number of stores), operating 260 stores in 29 states as
of April 16, 1999. Founded in 1895, the Company operates stores in regional and
super-regional shopping malls under the names Whitehall Co. Jewellers (210
stores), Lundstrom Jewelers (47 stores) and Marks Bros. Jewelers (3 stores). On
January 20, 1999, the Company changed its corporate name from Marks Bros.
Jewelers, Inc. to Whitehall Jewellers, Inc. to align the corporate name with the
Company's principal store brand. The Company offers at competitive prices an
in-depth selection of fine jewelry in the following key categories: diamond,
gold, precious and semi-precious jewelry. The Company's target customers are
middle to upper middle income women over 25 years old. Central to the Company's
growth in operating profits and its high store productivity are its small but
flexible store format, the absence of recourse credit risk, its strong sales
culture and its operating efficiencies at both the store and corporate levels.

         The Company operates on a fiscal year ending January 31. The year ended
January 31, 1999 is referred to herein as fiscal 1998. From fiscal 1994 to
fiscal 1998, the Company's net sales grew at a compound annual rate of 22.3% to
$238.9 million, while income from operations grew at a compound annual rate of
23.6% to $27.3 million. The Company's growth during this period is attributable
to (i) new store openings (including the 36 Jewel Box stores acquired in
September 1998 as described below), which resulted in an increase in the number
of stores from 131 to 250 stores, (ii) higher store productivity, as average
annual sales per store increased from $836,000 to $1,100,000, and (iii) improved
operating efficiencies resulting in an increase in the Company's operating
margin from 11.0% to 11.4%.

         On September 10, 1998, the Company acquired substantially all of the
Jewel Box chain consisting of 36 stores located in eight states in the
southeastern United States. All of the acquired stores have been converted to
Whitehall/Lundstrom merchandise assortments, credit programs, operating
procedures and brand names.



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         The Company believes it has significant opportunities to increase sales
and profitability through an increased number of planned store openings, the
implementation of new sales, marketing and merchandising programs designed to
continue comparable store sales growth, and continued adherence to its strict
standards regarding operating performance.

         Retailing Concepts. As of April 16, 1999, the Company's stores operated
under the names Whitehall Co. Jewellers (210 stores), Lundstrom Jewelers (47
stores) and Marks Bros. Jewelers (3 stores). Each store concept is designed
around an open, brightly-lit and inviting layout that encourages browsing by
mall shoppers. The Company's multiple name format allows the Company to open
additional stores in malls where it already has profitable locations. Whitehall
Co. Jewellers is the Company's primary trademark and is positioned to be
somewhat more upscale than the average mall-based jewelry store. As of April 16,
1999, the Company operated two stores in 44 malls and three stores in one mall.
In most cases a Lundstrom store is added to a mall only after the Company has
operated a successful Whitehall store in the same center. Generally, Lundstrom
is positioned slightly more upscale than Whitehall, with slightly greater
emphasis on more expensive diamond and gold merchandise.

INDUSTRY

         Total retail sales by jewelry stores in the United States in 1998 were
approximately $22.3 billion, and such sales grew between 1993 and 1998 at an
annual rate of approximately 6.2%, according to the U.S. Department of Commerce.

         The jewelry market is generally divided into three segments: fine
jewelry, costume jewelry, and guild jewelry. The broad "fine" jewelry market
segment represents a majority of the jewelry market in terms of revenue, and it
includes jewelry made from precious metals and gemstones, as well as finer
watches. Fine jewelry is sold at a range of price points from middle to upper
end, with the upper end consisting of luxury items such as unique design jewelry
items and expensive time pieces. Except for a few designer label offerings, fine
jewelry is generally not marketed under brand names. Costume jewelry consists of
jewelry made of non-precious stones and rhinestones, as well as inexpensive
watches. The "guild" market represents a small percentage of the total market.

         Jewelry is mainly distributed through jewelry stores (both independent
stores and chains), general merchandise and discount stores, department stores,
mail order and catalogs, apparel and accessories stores, and televised home
shopping networks. General merchandisers, discount stores, and apparel and
accessories stores generally sell costume jewelry and lower-priced "fine"
jewelry. Mail order and home shopping distributors generally offer costume
jewelry and fine jewelry at low to middle price points. Department stores
generally offer a wider assortment of merchandise including a selection of
costume, fine and some "guild" jewelry.

         Jewelry stores, including independent stores and jewelry chains,
represent the largest distribution channel based on industry sales. Most jewelry
stores cater to the broad fine jewelry market offering a variety of items at a
range of price points. As of 1998, there were over 28,000 retail jewelry stores
nationwide accounting for almost one-half of all jewelry sales. The retail
jewelry industry is highly fragmented with no single chain accounting for a
significant percentage of the fine jewelry market.

         The Company believes that the retail jewelry industry is consolidating
due to a variety of factors, including (i) bad debt exposure, which has impacted
jewelry stores that extend recourse credit to customers, (ii) over-expansion of
stores and the failure to close unprofitable stores, and (iii) financial risk of
high leverage. The Company believes that industry consolidation will continue as
independent jewelers find it increasingly difficult to achieve economies of
scale in merchandise purchasing and real estate site selection. 






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OPERATING STRATEGIES

         The Company believes that its success is attributable in large measure
to its business strategy which emphasizes adherence to the Company's strict
operating standards regarding real estate selection, credit policies,
performance of sales personnel, store profitability and cost control. The
principal elements of the Company's operating strategies are as follows:

         Small, Flexible Store Format in Regional Malls. The Company believes it
has a competitive advantage in obtaining high traffic, "center court" locations
in desirable regional and super-regional malls due principally to (i) its small
average store size of approximately 875 square feet, which, while considerably
smaller than the average store size of most of the Company's competitors,
generates comparable sales volumes, (ii) its ability to adapt its store design
to various sizes and configurations, and (iii) its high average sales per square
foot (approximately $1,323 in fiscal 1998). Over two-thirds of the Company's
stores are located in high traffic, "center court" locations. The stores' small
flexible format (which lowers the Company's fixed occupancy costs) and high
productivity are desirable to mall owners. The stores' open, attractive design
appeals to customers, while facilitating foot traffic and enhancing sales
opportunities for the Company.

         Absence of Recourse Credit Risk. The Company operates based upon a "no
credit risk" policy. When purchasing on credit, customers must use their
personal credit cards, the Company's private label credit cards (which are
available through a third party and are non-recourse to the Company), or other
non-recourse third party credit arrangements. The Company's strict policy
eliminates its credit risk associated with the customer's failure to pay. This
policy also distinguishes the Company from most of its competitors, which not
only bear such credit risk, but also rely on finance income in addition to
merchandise sales.

         Motivated, Sales-Oriented Store Personnel. The primary responsibility
of store sales personnel is selling to customers. To assist them in their
selling efforts, store personnel are authorized to discount prices within
certain limits and to choose from a variety of return/exchange options to offer
the customer. Most non-sale activities are largely centralized. In addition, the
absence of internal credit operations reduces the need for sales personnel to
focus on many in-store credit activities. Compensation and bonus programs
reinforce sales and margin goals on a daily, weekly and monthly basis. The
Company continually seeks to enhance the selling skills of its sales associates
through recruitment of experienced sales personnel and extensive, ongoing
training programs.

         Differentiated Merchandising. The Company offers an in-depth selection
of merchandise in several key categories of fine jewelry: diamond, gold,
precious and semi-precious jewelry. This "key category" focus is oriented to the
Company's target customer, the middle to upper middle income woman. Unlike many
of its competitors, the Company carries only a limited selection of watches and
virtually no costume jewelry or gift merchandise. In recent years, the Company
has increased its average store inventory in an effort to expand the upper price
points and add more depth to the merchandise mix.

         Strict Operating Controls. The Company emphasizes high performance
standards, backed by strong incentive programs. Adherence to these standards in
the areas of store site selection, sales targets, store profitability and cost
control is fundamental to the Company's success. For example, the Company
reduced central overhead as a percentage of net sales from 6.0% ($6.4 million)
in fiscal 1994 to 5.1% ($12.2 million) in fiscal 1998 while continuing to build
infrastructure to handle new store growth. During this same period, the
Company's net sales increased by over 124% and the number of its stores
increased by 91%.



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GROWTH STRATEGIES

         The Company believes that it has significant opportunities to increase
sales and profits through continued execution of its store expansion strategy
and continued comparable store sales gains. The key elements of the Company's
growth strategies are as follows:

         Accelerated New Store Openings. The Company opened 64 stores during the
last two fiscal years, acquired 36 stores in fiscal 1998 through the acquisition
of the Jewel Box chain, and plans to open approximately 40 stores in calendar
1999. The Company anticipates opening a similar number of stores in 2000. The
following table shows the Company's store expansion during the periods presented
reflecting both store openings, acquisitions and closings for the respective
periods:


<TABLE>
<CAPTION>
                                                  YEAR ENDED JANUARY 31,
                                     1995       1996       1997      1998      1999
<S>                                  <C>        <C>        <C>       <C>       <C>
Open at beginning of period           122        131        146       164       191
Opened during period                   11         15         20        30        34
Acquired during period                 --         --         --        --        36
Closed during period                  (2)         --        (2)       (3)      (11)
Open at end of period                 131        146        164       191       250
                                     ----       ----       ----      ----      ----
Net increase                            9         15         18        27        59
                                     ====       ====       ====      ====      ====
</TABLE>

          To reduce the Company's risk associated with entering new malls, the
Company prefers to expand in established malls. In addition, the Company seeks
to open additional stores in its existing markets where the Company believes it
can obtain greater market penetration. The Company also seeks to identify new
geographic markets where it can cluster stores for ease of supervision and
increased name recognition. The Company entered the greater Los Angeles market
in fiscal 1997 and now has nine stores with three more stores expected to open
in fiscal 1999. The Company recently entered the Indianapolis market with two
store openings and has entered the Seattle market. The Company plans to open two
additional stores in the Seattle market, and plans to enter the Austin, Texas
market with one store opening in fiscal 1999.

              The Company seeks to open new stores in key locations in regional
and super-regional malls. The Company's national presence permits it to focus
its new store openings on desirable malls throughout the country and often to
obtain high traffic, "center court" locations in those malls to maximize
exposure to mall shoppers. The Company uses its multiple name format to open
additional stores in malls where it already has profitable locations. For
example, as of April 16, 1999, the Company operated two stores in 44 malls and
three stores in one mall.

              The Company continuously evaluates the performance of its stores
and closes certain stores from time to time that do not continue to meet its
strategic location profile or its performance requirements.



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MERCHANDISING

     The Company believes that an important element of its success is a focused
merchandising strategy that reflects its upscale customer orientation and small
store format. The Company seeks to provide a deep assortment of items across a
broad range of price points in its key product categories: diamonds (such as
diamond jewelry, diamond solitaires and bridal), gold, and precious and
semi-precious jewelry. Unlike many of its competitors, the Company carries only
a limited selection of watches and virtually no costume jewelry or gift
merchandise.

     Each store offers approximately 2,600 individual items, including
approximately 600 core jewelry items, which accounted for approximately 39% of
net sales in fiscal 1998. In addition, the Company has expanded its merchandise
assortment in higher price points. The Company's average price per merchandise
sale has increased from $255 in fiscal 1996 to $273 in fiscal 1997 and $286 in
fiscal 1998.

      In recent years, the Company has increased the average number of items
available in its stores to broaden the appeal of its merchandise assortment and
expand its product breadth in selected product categories, particularly bridal
and other diamond jewelry. As of January 31, 1999, 1998, and 1997, the Company's
average merchandise inventory per store (excluding consigned items) was
approximately $467,000, $446,000, and $393,000, respectively. Higher inventory
levels have, in combination with other factors, contributed to increases in
comparable store sales. In fiscal 1998, the rate of growth in inventory levels
declined to less than 5% as the Company reached its targeted inventory levels.

         The following table sets forth the Company's percentage of total
merchandise sales by category for the following periods:


<TABLE>
<CAPTION>
                                      (%) YEAR ENDED JANUARY 31,
                                      --------------------------
                           1995         1996         1997          1998         1999
                           ----         ----         ----          ----         ----
<S>                        <C>          <C>          <C>           <C>          <C> 
Diamonds                   56.8         57.6         57.5          61.3         59.9
Gold                       25.0         25.2         25.4          21.2         20.3
Precious/Semi-Precious     15.1         14.6         14.8          15.5         17.7
Watches                     2.4          2.1          2.1           2.0          2.1
Other                       0.7          0.5          0.2           ---          ---
                          =====        =====        =====         =====        ===== 
Total                     100.0%       100.0%       100.0%        100.0%       100.0%
                          =====        =====        =====         =====        ===== 
</TABLE>

               All stores carry the Company's core items. The Company also
customizes the merchandising of its stores based upon each store's sales volume,
individual market preferences and historical selling patterns. The Company
continually tests new items in its stores and monitors their sales performance
to identify additional sales opportunities.

         Along with its broad product assortment, the Company also provides
jewelry repair services to its customers (sales from which represented 3.5% of
fiscal 1998 net sales). Actual repair work is performed by jewelers under
independent contract. Approximately 140 of the Company's stores have independent
jewelers located in the store to provide on-site repair services to the
customer.

         Pricing Strategy. For purposes of pricing, the Company classifies its
merchandise into several broad categories. Consistent with many fine jewelry
retailers, a substantial portion of the Company's sales are made at prices
discounted from listed reference prices. Company personnel are authorized to
discount most merchandise prices within certain limits.



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<PAGE>   7


         CREDIT

         The Company operates based upon a "no credit risk" policy. When
purchasing on credit, customers must use their personal credit cards (e.g.,
Visa, MasterCard, American Express and others), the Company's private label
credit cards, which are available through a third party and are non-recourse to
the Company, or other non-recourse third party credit arrangements. Because the
Company's credit programs are non-recourse to the Company, the Company has no
customer credit risk for non-payment by the customer associated with the sale.
At the same time, the Company believes that its ability to offer credit through
its "private label" credit cards and other non-recourse arrangements is
attractive to many customers, including those who prefer not to have their
jewelry purchases count towards their credit limits on their personal third
party credit cards. The Company encourages sales on the Company's private label
credit card or other non-recourse third-party credit arrangements because
customer purchases on this type of credit tend to generate higher average sales.
In fiscal 1998, the Company's average credit sale was approximately $780, versus
approximately $100 for a purchase paid for with cash or by check. The Company
believes that its success in building its non-recourse credit sales has been a
significant factor in its improvement in comparable store sales.

         The Company's credit strategy and its focus on a more upscale clientele
are interrelated. A substantial portion of the users of private label credit
offered by most jewelers tend to be customers with more limited financial
resources or a weaker credit history. In contrast, the Company's adherence to a
"no credit risk" policy limits the Company's sales to such individuals. Thus,
the Company has historically oriented its merchandising programs to appeal to a
more affluent, less credit-reliant consumer.

         The Company established its private label program through Bank One (and
other non-recourse credit purveyors), whereby customers may apply for instant
credit on merchandise purchases. In late 1998, Bank One and G.E. Capital formed
a private label credit joint venture called Monogram Credit Services, L.L.C. In
January 1999, the Company consented to have its contract with Bank One assigned
to Monogram Credit Services, L.L.C. Under these credit programs, the credit
purveyors have no recourse against the Company based on the customer's failure
to pay; recourse against the Company is restricted to those limited cases where
the receivable itself is defective (such as incorrectly completed documentation
or certain situations involving customer fraud). The Company's expense related
to these limited cases was less than 0.5% of sales during fiscal 1998. The
Company's credit card discount expense for fiscal 1998 and fiscal 1997
represented 3.0% and 2.9%, respectively, of credit sales for those years. In
general, the Company's credit card discount expense is higher for its private
label programs than for personal credit cards, such as Visa and MasterCard.
Pursuant to the Company's relationship with Monogram Credit Services, L.L.C.,
the joint venture provides credit to the Company's customers using its own
credit criteria and policies. The Company pays a fee to Monogram Credit
Services, L.L.C. based primarily upon the volume of credit so extended. The
Company has similar non-recourse arrangements with other credit purveyors, which
it uses in addition to the Monogram Credit Services, L.L.C. program to assist
customers in financing their purchases. In addition, the Company utilizes a
check authorization company which guarantees payments on transactions involving
certain personal checks.

         During the third quarter of fiscal 1997, the Company introduced a
"One-Year No-Interest" program through a non-recourse agreement with Bank One.
Under this program, Bank One offered customers a financing arrangement with no
interest for one year, for which the Company paid Bank One a significantly
higher fee than it pays under its standard program. The Company used this
program throughout fiscal 1998 and feels the usage of this program contributed
to an increase in comparable store sales. The Company continues to offer this
program through Monogram Credit Services, L.L.C.

         During recent periods, there has been an increase in consumer credit
delinquencies generally which resulted in financial institutions reexamining
their pending practices and procedures. Consequently, the availability or cost
of third party credit offered by the Company could be adversely affected.


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<PAGE>   8

STORE OPERATIONS

         Store Layout. Over two-thirds of the Company's stores are located in
high traffic, "center court" locations. Nearly all of the stores have an open
entrance rather than the more traditional single-doorway entrance. Stores are
brightly-lit and generally are designed to have display cases situated along the
lease line. By formatting the stores in this "customer-friendly" manner and
without a formal entryway, a casual mall shopper comes in very close contact
with the store's merchandise and personnel without the natural apprehension many
have upon "entering" a fine jewelry store.

         Store Management. Each of the Company's stores is operated under the
direction of a store manager who is responsible for management of all
store-level operations, including sales and personnel matters. Most non-sales
related administrative functions are performed at the Company's corporate office
in Chicago. A significant portion of the compensation of store managers is based
on incentives which focus on sales productivity. The store managers are assisted
by a staff that usually includes an assistant manager and four to eight sales
associates, depending upon store operating hours and anticipated sales volume.
The Company has approximately 35 supervisors who concentrate their efforts on
store-focused sales strategies. Each supervisor is based in one store, but
spends most of his or her time visiting other stores. The Company's senior
officers spend a substantial percentage of their time visiting stores to
reinforce the close communication between senior executives and store personnel.

         Operating Cost Controls. The Company's store operations are designed to
maintain low operating costs at the store level. The Company's small average
store size reduces fixed costs, and the lack of recourse credit eliminates the
need for most overhead expenses normally associated with credit operations. The
Company also seeks to reduce store-level operating costs through efficient sales
staff utilization. To assist store personnel in their selling efforts, many of
the administrative functions normally performed at the store level are performed
at the corporate level. Due to computerization, more efficient use of personnel,
and the elimination of certain non-essential functions, the Company reduced
central overhead as a percentage of net sales from 6.0% in fiscal 1994 ($6.4
million) to 5.1% in fiscal 1998 ($12.2 million). During that period, the
Company's sales increased by over 123% and the number of stores increased by
91%.

         Store Employee Compensation. The Company seeks to hire experienced
sales personnel and motivate its store employees by linking a substantial
percentage of employee compensation to individual and store sales performance,
as well as by offering opportunities for promotion within the Company.

         Employee Training. The Company believes that providing knowledgeable
and responsive customer service is critical to the Company's success and,
accordingly, has developed and implemented extensive employee training programs.
In addition to training during the first weeks of employment and continuous
on-the-job training provided by management, the Company has several training
videos to supplement its written training materials for sales associates. Store
managers complete a manager training and development program.

ADVERTISING AND PROMOTIONS

         In the second quarter of fiscal 1997, the Company retained a
full-service advertising and marketing firm which helped the Company implement
expanded advertising campaigns and strategies. The Company improved the in-store
and point-of-sale signage with a more upscale look which is a key element of its
advertising strategy. The Company initiated a holiday season radio campaign in
certain markets, and tested various direct mail campaigns as part of its new
advertising initiatives. Frequent special promotions such as diamond remount
events, clearance sales, "Vice President's Day Events," and similar promotions
are designed to increase traffic through the Company's stores and generate an
urgency 



                                      -8-
<PAGE>   9

for customers to make purchases. These events vary from year to year and among
stores. Publicized events are an important part of the Company's marketing
efforts, and the Company generates a significant portion of its revenues during
such events. During fiscal 1998, the Company expanded its holiday radio
advertising program and direct marketing campaign. The Company plans to continue
its usage of certain direct mail and media advertising programs in fiscal 1999.

         The Company offers a 30-day return policy; however, for certain sales,
store personnel may choose from a variety of return or exchange options to offer
the customer, including, but not limited to, a 30-day return policy or a 90-day
exchange policy.

PURCHASING

         The Company does not manufacture its merchandise. The Company purchases
substantially all of its inventory, including loose gems, directly from prime
suppliers located in the United States and abroad. The Company purchases
merchandise from approximately 144 vendors, primarily in the United States,
Israel, Italy and the Far East, who supply various jewelry products under U.S.
dollar-denominated agreements. During fiscal 1998, the Company's largest
supplier and five largest suppliers accounted for approximately 11% and 34%,
respectively, of the merchandise purchased by the Company. The Company also has
certain subcontracting arrangements with jewelry finishers to set loose diamonds
and gemstones into rings and other jewelry, using styles established by the
Company, or other companies. Management believes that the relationships the
Company has established with its suppliers and subcontractors are good. The
Company has not experienced any difficulty in obtaining satisfactory sources of
supply and believes that adequate alternative sources of supply exist for
substantially all types of merchandise sold in its stores. However, the loss of
one or more of its major suppliers, particularly at certain critical times
during the year could have a material adverse effect on the Company.

         The Company maintains a strict quality assurance program, with almost
all shipments from suppliers being counted or weighed and visually inspected
upon receipt at the Company's headquarters in Chicago, Illinois.

         During fiscal 1998, the Company's average net monthly investment in
inventory (i.e., the total cost of inventory owned and paid for) was 61% of the
total cost of the Company's on-hand merchandise. The amount of consignment
merchandise has increased in recent years. For example, the average amount of
consignment merchandise per store has increased from approximately $106,000 on
January 31, 1997 to $151,000 on January 31, 1999. The Company is also often
granted exchange privileges which permit it to return or exchange certain unsold
merchandise for new products at any time. Those arrangements permit the Company
to structure its relationships with vendors to encourage their participation in,
and responsibility for, merchandise turnover and profitability. Those
arrangements also permit the Company to have more merchandise available for sale
in stores and reduce somewhat the Company's exposure to changes in fashion
trends and inventory obsolescence.

         The Company and the jewelry industry in general are affected by
fluctuations in the prices of diamonds and gold and, to a lesser extent, other
precious and semi-precious metals and stones. During fiscal 1998, diamonds,
gold, precious and semi-precious jewelry accounted for approximately 98% of the
Company's net merchandise sales. The supply and price of diamonds in the
principal world markets are significantly influenced by a single entity, the
Central Selling Organization ("CSO"), a marketing arm of DeBeers Consolidated
Mines Ltd. of South Africa. The CSO has traditionally controlled the marketing
of a substantial majority of the world's supply of diamonds and sells rough
diamonds to worldwide diamond cutters from its London office in quantities and
at prices determined in its sole discretion. The availability of diamonds to the
CSO and the Company's suppliers is to some extent dependent on the political
situation in diamond producing countries, such as South Africa, Botswana, Zaire,
republics of the former Soviet 



                                      -9-
<PAGE>   10

Union and Australia, and on continuation of the prevailing supply and marketing
arrangements for raw diamonds. Until alternate sources could be developed, any
sustained interruption in the supply of diamonds or any oversupply from the
producing countries could adversely affect the Company and the retail jewelry
industry as a whole. The Company has been increasing the amount of inventory
(especially higher priced items) carried in its stores. Higher priced jewelry
items tend to have a slower rate of turnover, thereby increasing the risks to
the Company associated with price fluctuations and changes in fashion trends.

MANAGEMENT INFORMATION SYSTEMS

         The Company utilizes customized management information systems
throughout its business to facilitate the design and implementation of selling
strategies and as an integral part of its financial and other operational
controls. The Company's management information system utilizes an IBM AS400. The
system incorporates point-of-sale computers in its stores with a merchandise
management and purchase order management system and utilizes software
specifically designed for the jewelry industry, which the Company has customized
extensively to meet its needs. The information system has been upgraded to
support the Company's needs and further upgrading is necessary to support the
Company's growth.

         The Company uses the management information system to track each
individual item of merchandise from receipt to ultimate sale or return to the
vendor. As a result, management can closely monitor inventory by location,
sales, gross margin, inventory levels and turnover statistics, reallocating
inventory among stores when beneficial. This system also enables management to
review each store's and each employee's productivity and performance. Based on
the sales data, the Company tailors each store's inventory composition and plans
the Company's purchasing requirements accordingly. The system enables the
Company to manage its inventory at the store level, including the automatic
replenishment of merchandise generally twice a week.

         The system also automatically provides a daily reconciliation of each
store's transactions for prompt investigation of discrepancies. The
point-of-sale computers are polled nightly by the headquarters system and
updated data is available at the beginning of the following day for use by
central office and store supervisory personnel, and for transfer into the
Company's accounting, merchandising, and other management information systems.

         The Company has implemented, through its point-of-sale system, the
ability to capture and retain selected customer data from each sale (name,
address, phone, birthday, anniversaries, historical purchases, etc.). The data
is used by Company store managers and sales associates in their efforts to
contact customers and anticipate and facilitate future add-on purchases by its
customers. For example, a husband who buys a diamond necklace for his wife's
birthday may receive a mailing approximately a year later suggesting a matching
set of diamond earrings. The Company believes that additional sales volume can
be achieved by utilizing such programming initiatives. The customer data is used
by the Company in its direct marketing promotional campaigns. The point of sale
systems also track required inspection dates for customers with diamond
warranties. Sales associates are prompted by the system to contact these
customers to remind them of the required in-store inspection.

         The Company's supervisors use laptop computers in the field to obtain
up-to-date financial information on their stores and down-load it on an
as-needed basis from the Company's central computer system. The information
available via laptop includes, among other items, store sales, gross profit,
personnel costs, and sales associates' productivity information.



                                      -10-
<PAGE>   11


YEAR 2000

         The "Year 2000" problem concerns the inability of information systems
to properly recognize and process date-sensitive information beyond January 1,
2000. Like many companies, "Year 2000" computer hardware and software failures
of internal systems and/or of third party systems could have a significant,
adverse impact on all aspects of the Company's operations. Because of the range
of possible issues and the large number of variables involved, it is impossible
to quantify the potential cost of problems should the Company's remediation
efforts or the efforts of third parties with whom the Company does business not
be successful. The Company recognizes the need to address this problem in order
to minimize the effects of the "Year 2000" issue on its operations and its
relationships with vendors and other third parties. The Company is using both
internal and external resources to complete its "Year 2000" project.

                 The Company operates exclusively in one business segment,
specialty retail jewelry. All stores are located within the United States. The
Company's two principle mission-critical systems applications are the
point-of-sale ("POS") terminals and software which control store transaction
processing, and the centrally maintained information systems infrastructure
which controls financial, merchandising and administrative systems.

                 All stores use the same POS software that is licensed from a
third-party vendor. In the fall of 1998, a "Year 2000" compliant version of the
POS software was installed at all stores. Testing of the new software is
complete. The Company has replaced approximately two-thirds of its POS desktop
terminals with "Year 2000" compliant terminals. The remaining portion is
expected to be replaced during the summer of 1999.

                 The Company's financial management, information technology,
merchandising and other administrative functions operate centrally from the
Company's corporate office. The Company uses a mid-range computing platform
which is complemented by various networks. The operating systems and hardware
platforms were upgraded, tested and are currently "Year 2000" ready. The
replacement or upgrading of financial management and various customized software
packages is between approximately 50% and 70% complete. These systems upgrades,
replacements, renovations, and testing thereof, are scheduled to be completed
during the summer of 1999. Such completion is currently on schedule. With
respect to systems that the Company is not upgrading, the Company is currently
renovating those systems to be "Year 2000" compliant.

                 The Company is developing contingency plans to address
unforeseen system or environmental failures due to the "Year 2000" issue. The
major focus of these plans is to have documented procedures to handle the
mission-critical functions and to define the business tactics to identify and
manage certain problems which may occur as a result of the "Year 2000" issue in
as non-disruptive a manner as possible. The Company does not expect to be able
to develop feasible contingency plans to address all "Year 2000" related
failures and contingency plans which are developed will only mitigate the impact
of "Year 2000" failures.

                 The Company's total costs for making its mission-critical
systems "Year 2000" compliant are not expected to be material to the Company's
financial condition. The estimated total cost of the "Year 2000" project is
expected to approximate $1.0 million. To date, the total amount expended on the
project is approximately $500,000.

                 The Company believes that the systems upgrades, replacements
and renovations will be made on a timely basis, and that the "Year 2000" issue
with respect to the Company's internal systems will not pose significant
operational problems or result in costs that have a material adverse impact on
the Company's business, financial condition or results of operations. A failure
by the Company to timely address the "Year 2000" issue, or a failure by the
Company to maintain adequate information systems 



                                      -11-
<PAGE>   12

capacity and infrastructure as it upgrades, replaces and renovates its
information systems could have a material adverse impact on the Company's
business, financial condition or results of operations.

         In addition to the Company's internal systems, certain systems of third
party suppliers and service providers which are not currently "Year 2000"
compliant could adversely impact the Company's operations. The Company has
confirmed with its primary lenders and private-label and other credit suppliers
that their systems are, or will on a timely basis be, "Year 2000" compliant. In
addition, certain key vendors and service providers have confirmed orally that
they are implementing plans to address the "Year 2000" issue. The Company will
continue communicating with its key suppliers and key service providers to
monitor their plans to address, and progress in addressing, the "Year 2000"
issue and to evaluate any impact on the Company. However, there can be no
assurance that the systems of third parties with whom the Company does business
will be converted timely. A failure by any such third party to timely address
the "Year 2000" issue could have a material adverse impact on the Company's
business, financial condition or results of operations.

INVENTORY LOSS PREVENTION AND INSURANCE

         The Company undertakes substantial efforts to safeguard its jewelry
inventory from loss and theft, including the use of security alarm systems and
safes at each store and the taking of daily inventory of higher value items. In
addition, the Company's inventory management and control system, which tracks
each item in the Company's inventory, provides a further check against loss or
theft. During fiscal 1998, in-store inventory shrinkage amounted to
approximately 1.0% of sales. The Company has a full-time manager who directs the
Company's loss prevention efforts. The Company maintains insurance (subject to
certain deductibles) covering the risk of loss of merchandise in transit and at
store premises (whether owned or on consignment) in amounts that the Company
believes are reasonable and adequate for the types and amounts of merchandise
carried by the Company.

COMPETITION

         The jewelry business is fragmented and highly competitive. The Company
competes with national and regional jewelry chains and local independently owned
jewelry stores, especially those that operate in malls, as well as with
department stores, catalog showrooms, discounters, direct mail suppliers,
televised home shopping networks and internet commerce. Certain of the Company's
competitors are substantially larger and have greater financial resources than
the Company and can take advantage of national advertising programs. The Company
also believes that it competes for consumers' discretionary spending dollars
with retailers that offer merchandise other than jewelry.

         Management believes that the primary competitive factors affecting its
operations are store location and atmosphere, quality of sales personnel and
service, breadth and depth of merchandise offered, pricing, credit and
reputation. The Company emphasizes its merchandise selection, sales personnel,
store location and design and pricing in competing in its target market, which
is relatively less credit sensitive.

TRADEMARKS

         Whitehall(R) Co. Jewellers, Lundstrom(R) Jewelers and Marks Bros.(R)
Jewelers are registered trademarks in the United States.



                                      -12-
<PAGE>   13



EMPLOYEES

         As of January 31, 1999 the Company had approximately 1,740 employees,
including approximately 1,610 store level employees. The Company usually hires a
limited number of temporary employees during each Christmas selling season. None
of the Company's employees are represented by a union. The Company believes that
its relations with its employees are good.

REGULATION

         The Company's operations are affected by numerous federal and state
laws that impose disclosure and other requirements upon the origination,
servicing and enforcement of credit accounts, and limitations on the maximum
amount of finance charges that may be charged by a credit provider. Although
credit to the Company's customers is provided by third parties without recourse
to the Company based upon a customer's failure to pay, any restrictive change in
the regulation of credit, including the imposition of, or changes in, interest
rate ceilings, could adversely affect the cost or availability of credit to the
Company's customers and, consequently, the Company's results of operations or
financial condition.

         The Company's operations are also affected by federal and state laws
relating to marketing practices in the retail jewelry industry. In marketing to
its customers, the Company compares many of its prices to "reference prices."
The Company's literature indicates to customers that its reference price for an
item is either the manufacturer's suggested retail price or the Company's
determination of the non-discounted price at which comparable merchandise of
like grade or quality is advertised or offered for sale by competitive retailers
and is not the Company's current selling price or the price at which it formerly
sold such item. Although the Company believes that pricing comparisons are
common in the jewelry business and that the Company's practice is in compliance
with applicable laws relating to trade practices, there can be no assurance that
this position would be upheld.

ITEM 2.  PROPERTIES

PROPERTIES

         As of April 16, 1999 the Company operated 260 stores in 29 states. All
of these stores are leased and are located in regional or super-regional malls.
The Company's typical new store lease has a term of 10 years plus the first
partial lease year. Terms generally include a minimum base rent, a percentage
rent based on store sales and certain other occupancy charges. At January 31,
1999 the average remaining life of the leases for the Company's stores was
approximately six years. While there can be no assurance, the Company expects to
be generally able to renew these leases as they expire.

         The Company also leases approximately 28,400 square feet of office and
administrative space in Chicago, Illinois in an office building housing its
corporate headquarters, distribution functions and quality assurance operations.
This lease expires on May 2, 2004.


                                      -13-
<PAGE>   14


ITEM 3.       LEGAL PROCEEDINGS

LEGAL PROCEEDINGS

         The Company is involved in certain legal actions from time to time
arising in the ordinary course of business, but management believes that none of
these actions, either individually or in the aggregate, will have a material
adverse effect on the Company's results of operations or financial condition.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.



                                      -14-
<PAGE>   15

                                     PART II

ITEM 5.       MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
              MATTERS

         Incorporated herein by reference to section entitled "Related
Stockholder Matters and Market for the Company's Common Stock" in the Company's
1998 Annual Report, which is included as Exhibit 13 to this Annual Report on
Form 10-K.

ITEM 6.       SELECTED FINANCIAL DATA

         Incorporated herein by reference to section entitled "Selected
Historical Financial and Operating Data" in the Company's 1998 Annual Report,
which is included as Exhibit 13 to this Annual Report on Form 10-K.

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
              RESULTS OF OPERATIONS

         Incorporated herein by reference to section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in the
Company's 1998 Annual Report, which is included as Exhibit 13 to this Annual
Report on Form 10-K.

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

               Incorporated herein by reference to section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Company's 1998 Annual Report, which is included as Exhibit 13
to this Annual Report on Form 10-K.

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Incorporated herein by reference to sections entitled "Statements of
Operations," "Balance Sheets," "Statements of Stockholders' Equity (Deficit),"
"Statements of Cash Flows" and "Notes to Financial Statements" in the Company's
1998 Annual Report, which is included as Exhibit 13 to this Annual Report on
Form 10-K.

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
              FINANCIAL DISCLOSURE

         None.




                                      -15-
<PAGE>   16


                                    PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information contained under the headings "Election of Directors"
and "Executive Officers" in the Proxy Statement (which Proxy Statement will be
filed with the Securities and Exchange Commission on or before May 10, 1999) is
incorporated herein by reference.

ITEM 11.      EXECUTIVE COMPENSATION

         Except for information referred to in Item 402(a)(8) of Regulation S-K,
the information contained under the headings "Election of Directors" and
"Executive Compensation and Other Information" in the Proxy Statement (which
Proxy Statement will be filed with the Securities and Exchange Commission on or
before May 10, 1999) is incorporated herein by reference.

ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information contained under the heading "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement (which Proxy
Statement will be filed with the Securities and Exchange Commission on or before
May 10, 1999) is incorporated herein by reference.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information contained under the heading "Certain Relationships and
Related Transactions" in the Proxy Statement (which Proxy Statement will be
filed with the Securities and Exchange Commission on or before May 10, 1999) is
incorporated herein by reference.




                                      -16-
<PAGE>   17

                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

              (a)(1)  Financial Statements

              The following financial statements are filed as part of this
              report:

                      Report of Independent Public Accountants.*

                      Balance Sheets of the Company as of January 31, 1999 and
                      1998.*

                      Statements of Operations of the Company for the years
                      ended January 31, 1999, 1998 and 1997.*

                      Statements of Stockholders' Equity (Deficit) of the
                      Company for the years ended January 31, 1999, 1998 and
                      1997.*

                      Statements of Cash Flows of the Company for the years
                      ended January 31, 1999, 1998 and 1997.*

                      Notes to Financial Statements.*

----------

     *   Incorporated herein by reference from the Company's 1998 Annual Report.

              (a)(2)  Financial Statement Schedules

                      Report of Independent Public Accountants on Financial
                      Statement Schedule Page 20 

                      Schedule  II - Valuation and Qualifying Accounts Page 21

          All other schedules for which provision is made in the applicable
  accounting regulation of the Securities and Exchange Commission are not
  required under the related instructions or are inapplicable, and therefore
  have been omitted.

              (a)(3)       Exhibits

              The following Exhibits are filed herewith or incorporated herein:

EXHIBIT NO.    DESCRIPTION
-----------    -----------

3.1            Restated Certificate of Incorporation of the Company (1)
3.2            Amended and Restated By-Laws of the Company
4.1            Amended and Restated Stockholders Rights Plan (9)
4.2            Certificate of Designations of Series A Junior Participating
               Preferred Stock (1)
4.3            Indenture governing the Notes dated as of April 15, 1996 between
               the Company and Norwest Bank Minnesota, National Association, as
               Trustee (2)
4.4            Form of Series C Notes (included in Exhibit 4.3 to this Form
               10-K) (2)
4.5            Form of Series D Notes (included in Exhibit 4.3 to this Form
               10-K) (2)
4.6            First Supplemental Indenture to Indenture (2)
4.7            Second Supplemental Indenture to Indenture (3)
10.1           Second Amended and Restated Registration Agreement (2)


                                      -17-
<PAGE>   18

10.2       Letter Agreements re: Incentive Stock Option dated September 28,
           1995 between the Company and each of Hugh M. Patinkin, John R.
           Desjardins and Matthew M. Patinkin, respectively (1) (4)
10.3       Letter Agreements re: Restricted Stock Awards dated September 28,
           1995 between the Company and each of Hugh M. Patinkin, John R.
           Desjardins and Matthew M. Patinkin (1) (4)
10.4       Letter Agreements re: Incentive Compensation dated September 28,
           1995 between the Company and each of Hugh M. Patinkin, John R.
           Desjardins and Matthew M. Patinkin (1) (4)
10.5       Company's 1995 Executive Incentive Stock Option Plan (1) (4)
10.6       Letter Agreement re: Incentive Stock Option between the Company
           and Lynn D. Eisenheim (1) (4)
10.7       1996 Long-Term Incentive Plan, as amended (4)
10.8       Lease dated May 14, 1992 between the Company and New York Life
           Insurance Company relating to the Company's corporate
           headquarters (1)
10.9       Executive Severance Agreements each dated May 7, 1996, between
           the Company and each of Hugh M. Patinkin, John R. Desjardins,
           Matthew M. Patinkin and Lynn D. Eisenheim (2) (4)
10.10      ESOP Restructuring Agreement, dated as of March 29, 1996, between
           the Company and the Whitehall Jewellers, Inc. Employee Stock
           Ownership Trust (2)
10.11      Amended and Restated Employee Stock Ownership Plan (5)
10.12      1997 Long-Term Incentive Plan, as amended (4)
10.13      1998 Non-Employee Directors Stock Option Plan (4)(6)
10.14      Amendment Number One to the 1998 Non-Employee Directors Stock Option
           Plan (4)
10.15      Asset Purchase Agreement dated as of June 19, 1998 by and among
           Whitehall Jewellers, Inc. (f/k/a Marks Bros. Jewelers, Inc.),
           Carlyle & Co. Jewelers, Carlyle & Co. of Montgomery and J.E.
           Caldwell Co. (7)
10.16      Amended and Restated Revolving Credit, Term Loan and Gold
           Consignment Agreement dated as of September 10, 1998 by and among
           Whitehall Jewellers, Inc. (f/k/a Marks Bros. Jewelers, Inc.) the
           Banks (as defined therein), BankBoston, N.A. as Agents for the
           Banks, and LaSalle National Bank and ABN AMRO Bank, N.V. as
           Agents for the Banks (8)
10.17      First Amendment to Amended and Restated Revolving Credit, Term
           Loan and Gold Consignment Agreement dated as of November 17,
           1998, by and among Whitehall Jewellers, Inc., the Banks (as
           defined therein), BankBoston, N.A. as Agents for the Banks, and
           LaSalle National Bank and ABN AMRO Bank, N.V. as Agents for the
           Banks
10.18      401(k) Plan (3)(4)
10.19      Amendment Number Two to 401(k) Plan (4)(10)
10.20      Amendment Number Three to 401(k) Plan (4)
10.21      Amendment Number Four to 401(k) Plan (4)
10.22      Employment and Severance Agreement dated March 17, 1997 between
           the Company and Manny A. Brown (4)
13         1998 Annual Report
23         Consent of PricewaterhouseCoopers, LLP
24         Powers of Attorney (included on signature page)
27         Financial Data Schedule


-------------------

(1)        Incorporated herein by reference to the exhibits filed with the
           Company's Registration Statement on Form S-1, as amended
           (Registration No. 333-1794).

(2)        Incorporated herein by reference to the exhibits filed with the
           Company's Registration Statement on Form S-1, as amended
           (Registration No. 333-0403).

(3)        Incorporated herein by reference to the exhibits filed with the
           Company's Annual Report on Form 10-K for the fiscal year ended
           January 31, 1998, file No. 0-028176.

(4)        Represents management contract or compensatory plan or arrangement.

                                      -18-
<PAGE>   19

(5)        Incorporated herein by reference to the exhibits filed with the
           Company's Annual Report on Form 10-K for the fiscal year ended
           January 31, 1997, file No. 0-028176.

(6)        Incorporated by reference to exhibits filed with the Company's
           Registration Statement on Form S-8 (Registration No. 333-5015).

(7)        Incorporated by reference to the exhibits filed with the Company's
           Current Report on Form 8-K dated September 10, 1998 and filed with
           the Securities and Exchange Commission on September 22, 1998, file
           No. 0-028176.

(8)        Incorporated by reference to the exhibits filed with the Company's
           Quarterly Report on Form 10-Q for the period ended October 31, 1998,
           file No. 0-028176.

(9)        Incorporated by reference to the exhibits filed with the Company's
           Registration Statement as amended on Form 8-A/A and filed with the
           Securities and Exchange Commission on April 28, 1999, file No.
           0-028176.

(10)       There is no First Amendment to 401(k) Plan.

          (b)     Reports on Form 8-K

                  Current Report on Form 8-K dated January 20, 1999 and filed
                  with the Securities and Exchange Commission on February 3,
                  1999 (reporting the change in the Company's corporate name),
                  file No. 0-028176.



                                      -19-
<PAGE>   20


                        REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors of
Whitehall Jewellers, Inc.

Our report on the financial statements of Whitehall Jewellers, Inc. (formerly
Marks Bros. Jewelers, Inc.) has been incorporated by reference in this Form 10-K
from page 32 of the Annual Report of Whitehall Jewellers, Inc. In connection
with our audits of such financial statements, we have also audited the related
financial statement schedule which is included on page 21 of this Form 10-K.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.


/s/ PricewaterhouseCoopers LLP



Chicago, Illinois
March 3, 1999


                                      -20-
<PAGE>   21

                            WHITEHALL JEWELLERS, INC.

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

               TWELVE MONTHS ENDED JANUARY 31, 1997, 1998 AND 1999
                             (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                COLUMN A                       COLUMN B                COLUMN C            COLUMN D        COLUMN E
                --------                       --------       --------------------------   --------        --------

                                             BALANCE AT       CHARGED TO     CHARGED TO                    BALANCE AT
                                            BEGINNING OF      COSTS AND        OTHER                           END
               DESCRIPTION                     PERIOD          EXPENSES       ACCOUNTS       DEDUCTION      OF PERIOD
               -----------                  ----------        ----------     -----------     ---------     ----------
<S>                                         <C>                <C>            <C>            <C>           <C>
Twelve months ended 1/31/97
  Allowance for doubtful accounts......         $  565          $1,037           --          $  894(1)        $  708
                                                ======          ======                       ======           ======

  Inventory allowance..................          1,263           2,662           --           2,214            1,711
                                                ======          ======                       ======           ======

Twelve months ended 1/31/98
  allowance for doubtful accounts......         $  708          $1,182           --          $1,197(1)        $  693
                                                ======          ======                       ======           ======

  Inventory allowance..................          1,711           3,764           --           3,776            1,699
                                                ======          ======                       ======           ====== 

Twelve months ended 1/31/99
  Allowance for doubtful accounts......         $ $693          $1,278          --           $  944(1)        $1,027
                                                ======          ======                       ======           ====== 

  Inventory allowance..................          1,699           4,634         2,000(2)       4,385            3,948
                                                ======          ======         =====         ======           ====== 
</TABLE>


Note:

(1) Uncollectible items written off, less recoveries of items previously written
off.
(2) Charged to goodwill as part of the acquisition of the Jewel Box chain
of jewelry stores.

                                       -21-
<PAGE>   22





                                   SIGNATURES

         Pursuant to the requirements of Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, this Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

Date: April 16, 1999                         WHITEHALL JEWELLERS, INC.

                                       By:   /s/ John R. Desjardins
                                             -----------------------------------
                                             John R. Desjardins
                                             Executive Vice President, Finance &
                                             Administration and Secretary


                        POWER OF ATTORNEY AND SIGNATURES

         Each of the undersigned officers and directors of Whitehall Jewellers,
Inc. hereby severally constitutes and appoints Hugh M. Patinkin and John R.
Desjardins, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the
capacities indicated below, all amendments to this Annual Report on Form 10-K,
and generally to do all things in our names and on our behalf in such capacities
to enable Whitehall Jewellers, Inc. to comply with the provisions of the
Securities Exchange Act of 1934, as amended, and all requirements of the
Securities and Exchange Commission.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed by the following persons on behalf of the registrant
and in the capacities indicated on this 16th day of April, 1999.

<TABLE>
<CAPTION>
            Name                                               Capacity
            ----                                               --------
<S>                                            <C>
/s/ Hugh M. Patinkin                           Chairman, President and Chief Executive Officer
------------------------------------           (principal executive officer) and Director
Hugh M. Patinkin                            

/s/ John R. Desjardins                         Executive Vice President, Finance & Administration
------------------------------------           and Secretary (principal financial officer) and Director
John R. Desjardins                             

/s/ Matthew M. Patinkin                        Director
------------------------------------
Matthew M. Patinkin

/s/ Norman J. Patinkin                         Director
------------------------------------
Norman J. Patinkin

/s/ Jack A. Smith                              Director
------------------------------------
Jack A. Smith

/s/ Daniel H. Levy                             Director
------------------------------------
Daniel H. Levy

/s/ Richard Berkowitz                          Director
------------------------------------
Richard Berkowitz
</TABLE>

                                      -22-